Consumer power won't save the world, democratic power can

It's time we stop pretending that conscious consumerism can save the world. You've all heard the catchphrases. Consumer power. Vote with your wallets. Be the change you want to see. The idea is shoppers making ethical choices can somehow wield enough collective clout to make a difference.

What it actually does is perpetuate the status quo, and distract us from the democratic power we have to effect real change. Let me explain.

If there is anything economists believe it is the law of supply and demand. Demand for an item will tend to be lower at a higher price, and higher at a lower price. If socially or environmentally responsible products have a higher price, it's inevitable they'll sell less than cheaper products.

Professor Timothy Devinney, co-author of a book called The Myth of the Ethical Consumer, says it's all very well when corporate social responsibility is win-win for a business and its consumers.

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Illustration: Simon Letch

The problem is most consumers are unwilling to accept any kind of trade-off for a product to be more ethically sound.

Several studies suggest that while consumers profess social consciousness in surveys, that's not matched by their behaviour in the real world or even in structured experiments.

Most consumers are unwilling to pay a higher price for an ethical item, or accept any compromise in product functionality.

That means conscious consumerism, or ethical consumption, will only ever be a niche trend.

If you and like-minded people are determined, you can create enough demand to sustain a niche product. But it won't displace the mainstream products that are carrying on with business as usual.

You'll feel virtuous, perhaps even smug, but it won't solve the problem.

You buy recycled toilet paper, but the best-selling product on the next shelf will continue to be made of virgin Asian rainforest.

You avoid palm oil because you care about orangutans but millions of other people will continue consuming it in their chocolate, toothpaste and moisturiser. They might not even know it, because it's rarely labelled clearly.

You remember your reusable bags every time you buy groceries, but turtles will continue to be choked by plastic bags discarded by less conscientious shoppers. Plastic bags are free, making them the ultimate example of the economic maxim that low prices induce high demand.

It's the same for virtually every issue, whether it's endangered fish stocks or the the plastic microbeads in cosmetics that get washed down the drain and pollute the ocean.

What can you do about it?

Economics also teaches about market failure.

There are many types of market failure but a common one is where the price of goods is subsidised by "externalities". This means external costs that are borne by a third party and not reflected in the price.

For example, if a farmer sells cheap chicken meat then the exchange of value is between the chicken producer and the consumer (perhaps with a supermarket as the middleman).

But if the chicken producer cuts costs by keeping tens of thousands of birds in a high-rise block and dumping the effluent in the river, the meat is cheap because they're shifting costs onto someone else. In this case it's the chickens enduring terrible living conditions, the neighbours suffering from the stench, and anyone who is downstream and now has a polluted river.

You can try the same thought experiment to dispel the notion that coal is a cheap source of energy.

When there is a market failure, government intervention is appropriate.

That's why governments intervene to break up monopolies – another form of market failure – and it's also why they regulate to protect the environment and public health. This is not red tape, or green tape, or any other kind of tape. It's common sense.

It's true the law of unintended consequences means regulation can sometimes harm the economy in unexpected ways. That doesn't mean we shouldn't try, it means that we need to frame regulation carefully, monitor the effect and tweak if necessary.

We've pulled it off before. Take the banning of CFCs and HCFCs in the 1980s and '90s to fix the hole in the ozone layer, for example.

Personal responsibility is a popular idea among some politicians and business leaders because it means they don't have to take responsibility themselves. But both economic theory and empirical evidence about consumer behaviour demonstrates that individuals cannot solve big, systemic problems.

Using your consumer power merely creates a niche within the system, it doesn't change the game.

If you care about these problems, then lobby for real change – regulation that deals with harmful externalities. Demand lawmakers go ahead with the mooted ban on microbeads. Lobby to ban the plastic bag – or put a price on it that will create a mass change in behaviour. And so on.

Can't you do both?

The problem in society is many of us are time-poor and stressed. There's no problem if it's easy – if you've found a product that ticks all the boxes and the purchase has become habitual.

But often it's hard work to remember your shopping bags, and spend time in a store using an app to see if your free-range eggs are truly free-range, or check which face creams are free of both microbeads and palm oil.

Are you really going to go home after that and write a letter to your MP or a government minister? Are you going to get out there and protest? Or will you figure you're a good person and you've done your bit?

Professor Devinney says there can be a reinforcement effect that means if consumers spend effort on their choice, they wind up liking it more.

My concern is the feel-good factor means people buying ethical products will be so content with their choices, they'll lose sight of the end game.

If you want to save the world, be a citizen not just a consumer.

Ross Gittins is on leave. Caitlin Fitzsimmons is the Money editor and you can connect with her on Facebook and Twitter.

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